In the knowledge economy, trade secrets are the silent engines of innovation, their protection is not just about law, but about trust, investment, and national competitiveness.
India is presently at a critical juncture in the evolution of its intellectual property (IP) framework with the introduction of the Trade Secrets Bill, 2024. This legislative proposal gains significance as it emanates from the recommendations made by the 22nd Law Commission of India in its 289th Report issued in March 2024, which underscored the need for a comprehensive and standalone legal structure to safeguard trade secrets.¹ Despite being a rapidly growing economy driven by innovation, India lacks a dedicated statute for the protection of confidential business information.² At present, Indian legal mechanisms offer fragmented and indirect protection to trade secrets through an amalgamation of contract law, common law principles, and a patchwork of statutory provisions. These include instruments such as non-disclosure agreements (NDAs), employment contracts, the Indian Contract Act, 1872, the Copyright Act, 1957, and the Information Technology Act, 2000.³
Due to the absence of an explicit statutory regime, Indian courts often rely upon the doctrine of breach of confidence and equitable principles, which require elaborate judicial scrutiny.⁴ In contrast, jurisdictions such as the United States, European Union, and China have robust legal regimes specifically aimed at protecting trade secrets. The United States enacted the Defend Trade Secrets Act in 2016,⁵ while the European Union adopted the EU Trade Secrets Directive the same year.⁶ Given India’s obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), establishing a comprehensive trade secrets law is not only timely but also imperative to align with international best practices and attract foreign investment.
The Trade Secrets Bill, 2024 introduces a clear and unambiguous definition of trade secrets, characterizing them as commercially valuable information that is kept confidential through appropriate protective measures.⁷ This clarity is crucial in recognizing such information as an enforceable right under law. The bill empowers business entities to take legal action to enforce their rights over trade secrets, including the ability to license such information, disclose it selectively, and seek remedies such as injunctions, damages, and restitution in cases of misappropriation.⁸
Notably, the bill differentiates between lawful and unlawful means of acquiring trade secrets. It acknowledges acceptable practices such as independent discovery and reverse engineering, while simultaneously prohibiting dishonest methods such as theft, fraud, bribery, breach of contractual obligations, and inducement to breach.⁹ Additionally, the bill provides whistleblower protection, allowing individuals to disclose trade secrets in cases involving public interest concerns such as corruption, environmental violations, or national security threats.¹⁰
To ensure confidentiality during litigation, the bill mandates in-camera court proceedings and imposes access restrictions on sensitive documents submitted in court. These measures aim to strike a balance between transparency in judicial processes and the protection of confidential business information.¹¹
IMPLICATIONS FOR BUSINESSES AND THE ECONOMY
The enactment of the Trade Secrets Bill, 2024 is expected to serve as a transformative legal intervention to foster innovation and secure proprietary business knowledge in India. By enhancing the legal protection of trade secrets, the bill creates a more secure environment for firms to invest in research and development (R&D), particularly in technology-intensive sectors such as pharmaceuticals, information technology, and manufacturing.¹² The assurance of legal remedies against misappropriation is likely to boost the inflow of foreign direct investment (FDI), as investors gain confidence in the protection of sensitive know-how and business processes.
Startups and micro, small, and medium enterprises (MSMEs) stand to benefit significantly, as trade secret protection can serve as a cost-effective alternative to patenting, which often involves high costs and protracted timelines.¹³ Moreover, by reducing instances of corporate espionage and ensuring fair competition, the bill strengthens the overall integrity of the market. However, the long-term success of the law hinges on the establishment of an efficient adjudicatory framework and proactive enforcement mechanisms capable of resolving disputes expeditiously.¹⁴
CHALLENGES AND AREAS OF IMPROVEMENT
Despite the progressive nature of the Trade Secrets Bill, certain challenges may impede its effective implementation. The foremost issue concerns enforcement, as India’s judiciary is often criticized for delays and procedural inefficiencies.¹⁵ The establishment of fast-track courts and specialized Intellectual Property Rights (IPR) tribunals is essential to handle trade secret disputes swiftly and competently.
Another pressing concern is the lack of awareness among businesses, especially startups and MSMEs, regarding the importance and techniques of trade secret protection.¹⁶ Without sufficient knowledge, companies may fail to take reasonable measures to preserve the confidentiality of their proprietary information. To address this, government agencies, industry associations, and legal institutions must collaborate to conduct workshops, training sessions, and educational campaigns to build awareness and capacity among stakeholders.¹⁷
Furthermore, the bill needs to address the rising threats posed by cross-border data transfers and cyber intrusions. With the increased reliance on digital storage and artificial intelligence (AI)-driven operations, businesses face heightened risks of cyberattacks and data theft.¹⁸ The legislation must work in tandem with existing data protection frameworks such as the Digital Personal Data Protection Act, 2023 to ensure holistic security.¹⁹ Provisions for cybersecurity audits, encryption standards, and compliance monitoring could further enhance the bill’s efficacy.
The Trade Secrets Bill, 2024 marks a significant legislative milestone that aligns India’s intellectual property framework with global standards. By introducing statutory protection for confidential commercial information, the bill enhances the innovation ecosystem, strengthens investor trust, and ensures equitable market practices. Its successful implementation will depend on the establishment of efficient judicial mechanisms, harmonization with digital and AI regulations, and widespread stakeholder sensitization.
As India aspires to become a global economic powerhouse, the protection of intangible assets such as trade secrets becomes critical. The bill’s success will necessitate coordinated efforts from lawmakers, legal practitioners, businesses, and technologists to ensure a balanced and forward-looking regime. In fostering such collaboration, India can build a resilient legal framework that supports sustainable economic growth and technological advancement.
-
Law Commission of India, 289th Report on Trade Secrets Law in India (Mar. 2024), https://lawcommissionofindia.nic.in/report_twentysecond.
-
IIPRD, Analysis of the Proposed Trade Secrets Bill, 2024 (Apr. 2024), https://www.iiprd.com/the-proposed-trade-secrets-bill-2024-legal-framework-and-economic-impact.
-
Id.
-
Lexology, India’s Anticipated Legislation on Trade Secret Protection (Apr. 2024), https://www.lexology.com/library/detail.aspx?g=79e1cd8e-21da-45f2-89e5-5c37f80a8087.
-
Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836 (2016).
-
Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016.
-
Bar & Bench, Safeguarding Secrets: 22nd Law Commission’s Push for Trade Secrets in India (2024), https://www.barandbench.com/law-firms/view-point/safeguarding-secrets-22nd-law-commission-push-for-trade-secrets-in-india.
-
Id.
-
Lexology, supra note 4.
-
Id.
-
Intepat, Comprehensive Analysis of the Trade Secret Bill, 2024 (2024), https://www.intepat.com/blog/the-trade-secret-bill-2024-a-comprehensive-analysis.
-
IIPRD, supra note 2.
-
Intepat, supra note 11.
-
Id.
-
Kanalysis, The Protection of Trade Secrets Bill, 2024 (2024), https://kanalysis.com/the-protection-of-trade-secrets-bill-2024.
-
Id.
-
Id.
-
Lexology, Law Commission Proposes a Draft Bill on Trade Secrets for India (2024), https://www.lexology.com/library/detail.aspx?g=2a96c2ed-2476-44c3-bad5-e3594b5a7e66.
-
Id.
Author:
Mishbah Masood,
Content Creator Legitimate Scrutiny.